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Key Points

  • S&P 500 Meets the Underside of Resistance
  • Small Caps Rebound but Face a Tough Test
  • The NASDAQ 100 Still Has Work to Do
  • Three 80% Volume Days on the NYSE Grab Our Attention
  • The 10-Year Note Has a Decision to Make 

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Mid-Week Market Update – United States

The S&P 500 continued to trade below resistance near 4,200 and the declining 50 and 100-day moving averages. However, we are mindful of some interesting breadth dynamics that have begun to play out over the past week.

The 14-day RSI did not become oversold on the recent move lower, but the indicator continues to trade in a bearish regime.

Last week saw the ratio of advancing volume to advancing plus declining volume on the NYSE clock in at over 80% for three consecutive days (Wednesday – Friday). This is a form of a breadth thrust that we did not see during past rally attempts during the current decline in equities.

The S&P Small Cap 600 Index also remains below important resistance near 1,260, as well as the declining 50 and 100-day moving averages. The rally that has played out over the past week has met resistance, forcing a decision on the market. The 14-day RSI is holding in a bearish regime.

The relative trend is holding above the 50-day moving average. Breaking above the October/November highs would set the stage for further outperformance.

The NASDAQ 100 is still in a downtrend, below resistance near 13,000 and the declining 50 and 100-day moving averages. The 14-day RSI has not become oversold but remains in a bearish regime.

The relative trend is bearish, below the declining 50-day moving average despite a rally attempt over the past week.

The 10-Year Treasury Note has rebounded from support at the 2018 lows to meet the declining 50-day moving average, which is below the declining 100-day moving average. Thus far, the rally can only be classified as a bounce within an ongoing downtrend; the bears keep control until the moving averages can be breached.

The 14-day RSI continues in a bearish regime.

The Bloomberg Commodity Index continues to battle resistance at the 135 level as it holds above the rising 50 and 100-day moving averages. We continue to view the current consolidation as a pause within the context of a larger uptrend. The bulls remain in control. The 14-day RSI is still in a bullish regime.

Commodities remain in an uptrend relative to equities as the ratio trades above the 50-day moving average and near its recent highs.

Sentiment Check

The CBOE S&P 500 Volatility Index (VIX) and its 10-day moving average remain below 30 after both made lower highs on the most recent spike. This is a sign that there is less fear in the market, but we note that these levels are still elevated.

As the VIX recedes, so too do the Average True Ranges that we track. To be clear, these are still in uptrends for 2022; they are simply beginning to roll over from recent highs. A step in the right direction for equity bulls. A move above 4,200 for the S&P 500 as the ATRs move lower would be a sign that the downtrend may be reversing.

Take-Aways:

A solid rebound has begun to unfold in the U.S. equity markets—one that is accompanied by a breadth improvement that we have not witnessed during other rally attempts this year. At the same time, the decline in the 10-Year Note has been arrested at the 2018 lows. The sentiment is also becoming slightly less fearful. The major averages are all at/near key resistance points below their moving averages. The real work begins now. A break of resistance could signal the selling pressure is over. A reversal means that the bears are not ready to give up the control that they still possess.

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Disclosure: This information is prepared for general information only and should not be considered as individual investment advice nor as a solicitation to buy or offer to sell any securities. This material does not constitute any representation as to the suitability or appropriateness of any investment advisory program or security. Please visit our FULL DISCLOSURE page.